IN 1990, Harold Mlibink put $85,000 down on a $425,000 house in this suburban Los Angeles community and mortgaged the rest, hoping to make a nifty profit in two years. Last week, he had the house appraised at $325,000 and had to pick his chin up off the floor.
``My down payment has literally evaporated,'' says the emigre from Illinois. ``Now I'm paying off a loan that's more than my house is worth.''
The state that clobbered the rest of the nation in real estate gains through the building boom of the 1980s - nearly doubling the national average in home-price increases - is now getting mugged right back.
In what is proving to be California's worst real estate crash since 1925, the median home price in Los Angeles has dropped 25 percent in three years, while pricier markets have sunk even more: 40 percent to 50 percent in Rancho Santa Fe, Newport Beach, and Beverly Hills.
``It has been worse than a roller coaster, more like a downhill ski slope,'' says Pat Neal, incoming president of the California Association of Realtors (CAR).
In the past year, prices in Orange and Los Angeles Counties fell more than in any other region, the National Association of Realtors reports. Statewide, sales prices have dropped a more mod-est 10 percent on average from their 1991 peak. But they are down 31 percent over three years. ``People are shocked,'' says Dan Garrett, chief spokesman for the state Department of Real Estate. ``Since World War II, everybody pretty much thought of California as a one-decision investment: Buy and watch the price rise. Now it's going the other way.''
Part of what is going on, some economists say, is a market ``correction,'' making up for unrealistic gains in the 1980s. Between 1985 and 1992, home prices in California skyrocketed 70 percent on average - nearly double the 37 percent national average.
BEHIND the price hikes was a state economy doing better than the rest of the nation. When recession hit, California did not fall like everyone else. But when it finally did, it fell further and harder - losing some 400,000 jobs between 1988 and 1992.
Because of job losses in aerospace and construction, California on Oct. 8 slipped off the Department of Commerce's list of the top 10 states in personal income for the first time since 1929, when record-keeping began. Unemployment rose to 9.4 percent statewide, well above the 6.7 percent national average.
``Too many couldn't afford to buy anymore,'' says Walt Malony, chief spokesman for the National Association of Realtors. ``After several years of double-digit gains, California was due for a fall.'' If trends continue, he adds, the market will remain stalled before prices stabilize and the market begins to pick up.
Though Ms. Neal and others say the worst is over, some economists foresee another year of dropping prices and flat sales.
``We haven't hit bottom yet,'' says Nelson Pedrozo, real estate economist for the Business Forecasting Unit of the University of California at Los Angeles. ``I predict another 2 to 3 percent drop before this thing is over.''
In the meantime, the state's homeowners have lost $150 billion in equity from 1991 to 1993, according to Regional Financial Associates in Philadelphia. Worst hit is the south, where 26,000 homes went into foreclosure this year. That's three times last year's rate. The crash is remaking the face of the real estate industry statewide, Mr. Garrett says.
``Brokerage firms are folding and consolidating, brokers' licenses are way down, and the number of salespeople is half what it was four years ago,'' he says. His department has gone through a 25 percent reduction because of diminished funding from licensing and exam fees it collects. ``We are in difficult times, just holding on,'' he says.
If there is a bright spot, it is in mortgage-brokering and lending, Garrett and others say. Because mortgage rates have hit the lowest point in 25 years, the refinancing of homes is booming.
Those same low rates are opening the low end of the market to first-time home buyers, Neal says. A Federal Housing Administration loan program - allowing buyers to borrow up to $150,000 with 5 percent down - is also helping.
To ease the trend along, in April CAR joined several banks and lending institutions to start a hot line to answer questions for potential first-time buyers. Agents and brochures help walk prospective investors through the loan and buying process.
And a November ballot initiative, Proposition 173, is also aimed at those who have not owned a home in the state in the last three years. The initiative would allow the state to use existing bonds to insure home loans for first-time buyers with low and moderate incomes.